soldier saluting flag The GAOmade 3 recommendations based on its evaluation of how the militaryis lacking in helping servicemembers understand their retirementplan. Employers take note. (Photo: Shutterstock)

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The switch to the new blended retirement system for members ofthe U.S. military saw an effort on the part of the Department ofDefense to provide training to soldiers, sailors and airmen andairwomen on its still relatively new Blended Retirement System (BRS).

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However, those efforts have been less successful than they couldhave been, thanks in part to a lack of financial literacy on thepart of servicemembers that keeps them from getting thefull benefit of such training.

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That's according to a report by the Government AccountingOffice, which points out that it's not that DoD is failing toprovide training, but that it does not assess servicemembers' levelof financial literacy or evaluate how well the training succeeds atproviding necessary information so that servicemembers benefit fromit.

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In fact, some of the recommendations certainly wouldn't hurt inthe civilian world, either.

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Servicemembers face financial literacy challenges when it comesto retirement, the GAO says, including understanding theDoD-provided training because their initial level of financialliteracy is low. In addition, they can have a tough time relatingto retirement's long-term goals, because of the immediacy ofshort-term life goals.

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And in addition to experiencing difficulties taking the Opt-InCourse for BRS that may lay the groundwork for ongoing and futureDOD training, many have problems setting up online access to ThriftSavings Plan accounts.

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The GAO made three recommendations based on its evaluation ofthe training:

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1. Find gaps in knowledge. First, it said,financial literacy training assessments need to be reworked to findthe gaps in servicemembers' financial knowledge, and then trainingsessions should be modified accordingly.

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2. Explain pros and cons. Next, the Secretaryof Defense should provide servicemembers disclosures about thelump-sum payment option that explain key pieces of information,including the relative value of the payment, the potential positiveand negative financial ramifications of choosing that option and adescription of how it was calculated.

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This can be particularly important since, the report says, "DoDdetermines BRS lump-sum payment amounts at retirement by applyingan interest rate (or discount rate) to calculate the present valueof annuity payments servicemembers forego by taking a lump sum. TheBRS discount rate exceeds the rate used by private-sector pensionplans, resulting in a lower lump sum than if private-sector ratesapplied."

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It continues, "DoD can take certain steps to help servicemembersunderstand how to compare the BRS lump-sum payment option with thefull annuity option. Without this information, servicemembers maynot make informed decisions and potentially risk their retirementsavings."

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3. Make access to accounts easier. Andlast but not least, access to Thrift Savings Plan accounts needs tobe made easier and quicker, with the report recommending that theexecutive director of the Federal Retirement Thrift InvestmentBoard and the Secretary of Defense need to work together to findalternative ways for servicemembers to get their initial passwordso they can access and manage their online accounts withoutadditional delays.

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An evaluation by employers of employees' financial literacy,with plan materials adjusted accordingly, would be a welcomeaddition for many in the civilian world whose knowledge andunderstanding of financial principles is low. And in cases in whichemployees are offered a lump sum in place of annuitized payments, abreakdown in laymen's terms of how the two compare would be helpfulin choosing the right option.

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And for employees who have trouble accessing online accounts,better ways of facilitating such access could make life muchsimpler as they struggle with financial wellness issues.

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.